Block cheese closes unchanged at $1.70 on CME

Options volume exploded with activity yesterday as we traded over 2k combined puts and calls. It was pretty active and it was pretty balanced, with calls only slightly eclipsing the put volume by just over 10 percent.

A lot of collars (min/max) strategies were executed as the recent tightness in Class III/cheese price ranges have allowed people to get somewhat nervous that soon enough prices could get a move on in either direction ― it’s the uncertainty we’ve talked about in the short-term for some time now that could be seen in the market activity yesterday which produced very light futures volume but big options activity alongside prices that were mixed plus or minus only single-digit moves.

The snake is coiling, the attack is coming, we suspect we move big in Feb in both price and volume, and we are supporters of selling nearby’s and buying deferreds. Sell Jan, Feb and might as well throw in March, but get long Q2 in a big way we think.

The Asians are buying up a storm lately and that could be over some fright relative to decreasing Oceania milk production, but that drop off is seasonally expected and not astonishing; we suspect it is more likely related to a pre-Chinese new year buying spree to tide them over for pretty much all of February.

Spot session results:

Block cheese: $1.70 (unchanged)

Barrel cheese $1.65 (down 1.5 cent)

Grade A NFDM: $1.535 (unchanged)

Butter: $1.50 (up 1 cent)

In the grain complex, after eight straight sessions of fund position increases in corn, funds lightened up about 7k contracts yesterday as traders booked some profits in a turbulent two-sided trading day which ultimately saw lower closes. The day started with export sales which were largely greater than expectations, which turned the early morning trade from lower to higher. The gains were not to last, as the recent string of up-days simply gave way to a little tiny pullback ― nothing to really write home about.

Look for bullish strength to resume after Monday’s day off, if not today.

Today, we look for the grain complex to open higher.

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